Ukraine halts wheat exports in price dispute

Over government intervention in the market

Ukraine, the world’s sixth largest grain exporter, has halted wheat exports for the past week in a dispute with international grain traders over government intervention in the market, according to Financial Times.

Eleven ships are standing idle in Ukraine’s Black Sea ports, accumulating charges at a rate of $30,000 per vessel a day, with some further 15 ships on their way, according to western grain traders operating in Ukraine.

The authorities suspended wheat exports after grain traders refused to agree terms for selling wheat at low prices to a government strategic reserve.

The dispute, which comes at a time of growing shortages in the world wheat market, could damage Ukraine’s reputation in the commodity markets and among foreign companies operating in the country.

Jorge Zukoski, president of the American Chamber of Commerce in Kiev, said: “This has caused tremors throughout the agricultural sector. For us it also exemplifies fears that the new government could slide back into the negative anti-market attitudes we have seen before in Ukraine.”

Foreign companies are concerned about the direction of government economic policy because of the uncertainty that has accompanied the creation of the new government following parliamentary elections in March.

After a long delay, Viktor Yushchenko, president, this summer backed a coalition led by Viktor Yanukovich, his rival in the disputed 2004 presidential elections. However, it is unclear how closely Mr Yushchenko, an economic liberal, and Mr Yanukovich, who has strong ties with Ukrainian big business, will co-operate in policy formation.

The grain dispute began when the government asked grain trading companies to sell 300,000 tonnes of wheat to the strategic reserve at a discount of about $15 to the prevailing price, which was then $168 a tonne. The companies, which include international traders such as Cargill of the US, Germany’s Topfer and Bunge, the Dutch company, refused. A week ago, the authorities suspended the free export of wheat and introduced compulsory export licences. Traders immediately applied for licences but none have been issued.

Traders suspect the government has sought to increase wheat reserves to protect consumers against increases in the bread price at a time when energy prices are rising rapidly.

In a Financial Times interview yesterday, Mr Yanukovich promised the argument would be settled. He said: “We will uphold the principles of the market economy. These problems which now exist [in the grain market] are linked with domestic procedures which exist in every country.”

Mr Yanukovich insisted Ukraine had a surplus of wheat for its own market and for sale for export.

If you see a spelling error on our site, select it and press Ctrl+Enter